The push to get U.S. regulators to adapt their rulebooks to onchain reality just gained new momentum. Hyperliquid Policy Center (HPC) and Phantom submitted a joint comment letter to the Commodity Futures Trading Commission, as detailed in the original report. The letter asks the agency to modernize its regulatory framework so that publishing onchain protocol software does not, by itself, trigger registration requirements.
The filing arrives at a delicate moment for decentralized exchange infrastructure. Hyperliquid has grown into a leading derivatives venue built entirely on a self-custodial model, while Phantom’s non-custodial wallet reaches millions of users across Solana, Ethereum, and Bitcoin. Together they represent a growing cohort of protocols that argue the CFTC’s existing rules were written for custodial intermediaries—centralized order books, brokers, and clearinghouses—not for code that users interact with directly. This push mirrors a broader legislative struggle where traditional financial interests have attempted to derail landmark crypto bills just days before Senate votes.
The Core Request: Software Publication as a Non-Registrable Act
The letter makes three specific demands. First, clarify that merely publishing onchain protocol software does not require registration with the CFTC. Second, create a clear pathway for regulated exchanges and clearinghouses to adopt onchain infrastructure without running afoul of legacy rules. Third, codify the Phantom Technologies non-action letter into a formal rule. That 2024 non-action letter signaled that certain self-hosted wallet activities would not face enforcement, but leaving it as agency guidance creates uncertainty for builders.
The legal argument is straightforward. Under current interpretations, a developer could be treated like a traditional market operator simply for deploying smart contracts that users control. The HPC-Phantom letter contends that the self-custodial and transparent nature of onchain markets makes that analog inappropriate. Transactions settle onchain, assets remain in user wallets, and the software does not hold customer funds. Those structural differences, they argue, demand a different regulatory posture.
Why the CFTC’s Framework Feels Outdated
The CFTC’s rulebook was largely designed during an era when centralized exchanges and derivatives clearing organizations acted as trusted intermediaries holding customer margin and controlling trade execution. Onchain protocols disrupt that model by removing the intermediary. Yet the agency has not formally addressed whether the act of writing and releasing code is itself a regulated activity. This ambiguity chills development and forces projects to weigh legal exposure against innovation.
It’s not just a philosophical debate. The uncertainty has practical consequences for the U.S. market. Onchain derivatives platforms often choose to restrict access from American IP addresses rather than risk a regulatory fight. That pushes liquidity and users offshore, exactly the outcome the CFTC presumably wants to avoid. As other jurisdictions like the EU move ahead with MiCA-style frameworks that offer clearer guardrails, the pressure on U.S. agencies to provide similar clarity is mounting. In recent weeks, tokenized real-world assets crossed $20 billion on-chain, as highlighted in a market update, further underscoring the need for rules that accommodate automated, smart-contract-driven settlement.
What This Means for Exchanges and Onchain Markets
If the CFTC moves toward formalizing the requested clarifications, it could open a more defined path for centralized exchanges like CME or Coinbase Derivatives to integrate onchain components without triggering full registration of those software layers. The letter explicitly calls for a framework that lets regulated entities adopt distributed ledger technology for clearing and settlement. That would mark a significant shift from the current posture, where any move toward onchain rails is often met with regulatory caution.
At the same time, a formal rule codifying the Phantom non-action letter would provide non-custodial wallet providers and protocol developers with a baseline of legal comfort. That could speed up product launches and reduce the reliance on case-by-case relief that leaves everyone guessing. For developers, the line between publishing code and operating a market would become less of a legal gray zone.
Still, the request does not address every pain point. Questions remain about how liability attaches when software is modified by third parties or used to facilitate illicit activity. Neither the letter nor current CFTC precedent provides a clean answer, and that gap is one reason the debate is likely to extend well beyond this comment period. The underlying protocol activity shows why this matters now: developer engagement across top chains remains robust, as tracked in recent weekly metrics, reflecting the pace of onchain infrastructure growth that regulators can no longer ignore.
The Road Ahead
The letter lands at a time when the CFTC is signaling openness to updating its approach. The agency has brought enforcement actions against decentralized platforms before, but those often involved allegations of unregistered derivatives trading rather than the mere act of publishing code. The HPC-Phantom submission attempts to draw a bright line between software publication and market operation—a distinction that, if accepted, would reshape enforcement priorities.
What happens next depends on how the CFTC weighs the comment and whether it moves to propose a rulemaking or issue further guidance. Congressional action could also force the issue, though the legislative path remains tangled, as ongoing battles over crypto market structure bills demonstrate. For now, the industry’s push is simply to get the agency to say, in a durable form, that writing code is not a crime.
